Crypto Lending Platforms Under Immense Stress As Court Orders 3AC Liquidation
Multiple events in the last two months have seen various crypto lending platforms come under fire from both a liquidity and investor confidence angle. The first which had been the LUNA collapse had been the trigger for the rest such as the Celsius insolvency and the subsequent liquidation of Three Arrows Capital (3AC), the largest crypto fund. Now, the spillover effects of these events are beginning to rear their heads as crypto lending platforms face the ultimate test.
Which Crypto Lender Will Survive?
Different platforms have suffered through the three events mentioned above, each one worse than the last. 3AC’s liquidation is especially prominent given the fact that the firm had its tentacles in other large lenders in the space. One of these is Voyager which is currently facing some issues in the wake of the 3AC collapse.
Voyager had published a notice regarding 3AC that showed that the firm was in default of a loan of 15,250 BTC and $350 million USDC. These loans were for the client withdrawals, and as such, Voyager has had to look to other places to fulfill these withdrawals. One of these ways has been the 15,000 BTC and $200 million USDC revolver from crypto exchange FTX. Alameda also made a $75 million line of credit available for the lender.
Nexo withdrawals ramp up | Source: Arcane Research
Data from the crypto lender also shows that withdrawals have ramped up on the platform following the 3AC issues. However, it is not the only lending platform that is seeing a rise in withdrawals over the last couple of weeks.
Nexo is also a big player in the space and possesses significantly more liquidity but this has not shielded the platform from the fear that has struck investors. Data from Arcane Research shows that more than 50,400 BTC has been withdrawn from Nexo in the last two weeks which was triggered by a tweet that forecasted that Nexo would likely go the way of Celsius and hit a liquidity crisis.
Total market cap drops below $850 billion | Source: Crypto Total Market Cap on TradingView.com
Another platform feeling the heat is BlockFi. Although this platform’s issues have not been most prominent due to the bail-outs being offered, it remains in a precarious position, especially with prices not recovering in the market. BlockFi had received a $250 million line of credit from FTX and Alameda, and Morgan Creek plans to raise $250 million in equity capital for the platform. What this would do though is allow FTX to acquire BlockFi at ridiculously low prices.
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A prominent problem with all of these lenders has been their lack of transparency. This is why it has been difficult for those in the space to know the impact that events such as the LUNA collapse, Celsius’ insolvency, and 3AC’s liquidation has had on the market. Nevertheless, it is only a matter of time before the impacts begin to unravel and the market is able to see the full extent of the damage.
Featured image from Coin Guru, charts from Arcane Research and TradingView.com
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